I think Google's real strength is in their ability to 'disrupt' MS, Yahoo and others. A mere suggestion that Google plans to do X makes them a sserious competitor that needs to be dealt with. And there are rumors that Google has plans, not only for X, but for A through Z. As the disrupter Google is threatening old and new markets but has little to protect and everything to gain. MS also has a past riddled with failures when the go beyond their core products. So yes Google is in the driver's seat and is having loads of fun inflaming MS's paranoia. Robert Cringley, in his latest article talks more about this and speculates the Google may have peaked. If I were MS I would examine IBM for lessons in how to change.
It is considered wise to stand on the shoulders of giants but foolish to put yourself in front of them.
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